Each month I have a week where my Option trading activity takes on a life of its own as I review all my positions that have May options as part of the trade. This week those options are expiring so I have been going through my process of planning and executing any adjustments/exits that I want to make.
As I have added managed accounts for clients in recent months, this process becomes even more important to ensure that I exit trades that may be tired – or I look for good spots to adjust existing positions.
I have made a lot of adjustments this week and here is what I have left to address:
- $DDD I am long stock and short the May 50 Call (earlier Blog post with more detail on this one). This is currently OTM so it has a chance to expire worthless, let me keep premium collected
- $OSTK I am short stock and long the May 25 Call so I need to get value from it this week or move to a June strike
- $TSLA I exited my short stock position earlier (hit a stop) so I am now left with a May 80/90 Risk Reversal. Current bid ask on this is: 1.40/1.40 lol
- All other positions have been moved to May 24 weekly or June (or beyond)
There are no current earnings trades with May options
$ACT I am long stock with a May 115/105 Collar. Price is above 115 level so I need to decide if I will let it get called away or move to a June collar. Given it has already achieved the Complete status I will likely let this position get closed for me
- $ADBE I am long the June/May 40 Put Calendar. The May piece is to protect the short June piece so will leave until expiration
- $APO I am long stock with a short May 27.5 Call (Cov Call). I expect these to go poof, keep premium collected
- $ARUN I am short the May 17 Put. I am watching closely, but expect these to go poof, keep premium collected
- $BAC I am long stock and short the May 13 Call so I need to either let it get called or move to next week (or further out)
- $CBS I am short the May 49 Put. I expect these to go poof, keep premium collected
- $IMPV I am short the May 45 Call (part of Call Calendar). I expect these to go poof, keep premium collected
- $MPEL I am short the May 22 Put. I expect these to go poof, keep premium collected
- $SODA I am long stock & short the May 60/57.5 Strangle. Given the short Call is ITM I will need to address this by Friday or the stock will get called away
- $SYMC I am long stock and short the May 25 Call. I expect these to go poof, keep premium collected
- $SYNA I am short the May 37 Put (part of R/R CS). I expect these to go poof, keep premium collected
One of the challenges in trading is in determining an entry for a new stock position (whether it be long or short). There are a variety of methods followed by traders:
- a moving average test
- a horizontal support line test
- a resistance line test
- RSI over-bought or over-sold breach (70 or 30)
The above are just a few of the many triggers that could be used.
When a stock is “extended” – meaning price has moved away from a moving average like the 50 SMA – or a base it has built – the most logical approach is to look for a short entry. To illustrate how this works, I bring you the weekly chart of $AMCX that shows how an RSI trigger in the past would have worked for those that shorted it:
This 1st perspective is just to show a Rising Channel that has formed since 2010. Now I will add some boxes to show prior RSI O/B areas where a short would have been initiated:
The boxes show the areas where the RSI trigger would have got you in short. You would use whatever Stop settings as part of your trading plan. I have also noted here how the MACD has got extended as well. One reminder here, over-bought can stay over-bought for a while so that is always important to keep in mind.
Up to this point, this looks like the higher probability trade is to start a short. This could be a simple short on stock, it could be the purchase of Puts or a Put Spread, and could even include a Short Call or Short Call Spread trade.
Now to really mix up the thinking here. Here is a PnF chart:
Oh boy. By changing the lens here you can see that this had a TT B/O on 3/15 and has a Bullish PO of 90.
Options are thinly traded and have wide strikes so it is hard to recommend any particular trade. Here are a few ideas if you trade with wider stops:
- Go long the stock here and buy the May 60 Put (current bid/ask is 1.35/1.65). If the trade goes in your direction, find a good stall spot to sell premium against your position to recoup some (or all) of the cost for the Put.
- Go short the stock here and buy the May 65 Call (current bid/ask is 1.75/2.05). If the trade goes in your direction, find a good stall spot to sell premium against your position to recoup some (or all) of the cost for the Call.
No new positions added this week to my personal accounts. A few modifications on the Option pieces though:
$FTNT covered call for March ($24)
$SPRD covered call for March ($16)
$AIG covered call moved to March 01 weekly 38.5
$DVA March 120/115/105 Collar
I have been monitoring the $VMW Option chains – looking to put on a new long position for a Gap Fill play – and noticed heavy activity at the 80 Call strike:
Here is where the OI (Open Interest) currently stands for $AAPL:
No new changes this week to the Fab 5 as I am still traveling.
$MON closed at 96.11
$ORLY closed at 91.65
Did some trading this morning. Current new positions from today: U-turn L in $GPS , $FDO CS , $HLF Diag CS
Changes from prior week:
$GRPN 2012 short
$SVXY (short the January 62 straddle)
Light trading this week and made no additions to the basket. Existing positions remain: $MON $ORLY